Debt recycling in your 50s and 60s comes down to time, cash flow and what a lender will accept once your salary stops. We help you work through the lending side.
Home › Debt Recycling for Pre-Retirees
Moneysmart describes borrowing to invest as a medium to long-term strategy, generally lasting at least five to 10 years. In your 50s or early 60s, you may have the equity and income to start debt recycling, but less time for it to work.
The idea is the same at any age. You repay part of your home loan, then borrow that amount again through a separate split to invest. If you want the basics first, start with how debt recycling works.
Near retirement, the questions change:
Debt recycling can still suit some people close to retirement. It depends on how long you will stay invested, your cash flow after work and how you would handle a market fall with the loan still running.
The shorter timeframe is the main issue. A fall just before or after you stop work leaves less time to recover, and you may need to sell to fund living costs. Moneysmart notes that gearing brings bigger returns when markets rise and larger losses when they fall.
The deduction also changes value. Interest on an investment split may be deductible, but a deduction only saves tax at your marginal rate. Moneysmart also points out that for most people a super income stream is tax-free from age 60, so your taxable income, and the deduction's value, can fall once you retire.
Recycling new money usually stops once the home loan is cleared or the salary ends. Our guide to winding down the strategy before retirement covers what happens to the split after that.
A new loan or split may run well past the age you plan to stop work. Guidance from the Australian Securities and Investments Commission (ASIC) covers this. If you will still be making repayments after your expected retirement age, lenders need to work out whether retirement will change your income.
In practice, lenders may ask for an exit strategy. This is a plan showing how the loan will be repaid, or serviced, once you stop work.
As one example, Macquarie's broker guidelines require an exit strategy in some cases. It applies where the income servicing the loan is earned by someone aged 55 or over at application, who plans to retire, or will be 70 or older, before the loan ends.
Exit strategies a lender may consider include:
Lenders look for evidence, not intentions. Macquarie, for example, says evidence of super or investment holdings will generally be required where a plan relies on them. It also assesses a downsizing plan without assuming any growth in the home's value.
This is where a debt recycling mortgage broker helps. We check how lenders treat age, loan term and exit strategies before you apply, so the structure fits your timeline.
Super is often weighed against debt recycling in your 50s, and the main difference is access. Under Australian Taxation Office (ATO) rules, preservation age is 60 for anyone born from 1 July 1964.
You can access super once you reach preservation age and retire, and from 65 even if you are still working. That access is what lets super act as an exit strategy for an investment split.
Whether to use it that way is a question for your financial adviser, because it moves money out of super. Our comparison of debt recycling and salary sacrifice sets out how the two differ on tax, access and risk.
We start with your goals, planned retirement date, current loan, income and savings.
We compare more than 40 lenders on how they treat age, loan term and exit strategies for your situation.
If the lending works, we arrange separate splits for investment borrowing so it stays clearly identifiable.
Your financial adviser assesses whether borrowing to invest suits you, and a registered tax agent confirms the tax. We keep the lending aligned with their advice.
The first call is free, by phone or video. You come away knowing whether the lending side looks workable and what happens next.
Debt recycling near retirement is a narrower decision than it is at 40. There is less time to recover from a fall, the deduction may be worth less, and a lender will want to see how the loan ends.
If you still have working years ahead, a home loan to convert and a written exit plan, it may be worth exploring with your adviser. If those pieces are missing, paying down the home loan or building super may suit you better.
Book a free phone or video call to talk through your timeline, your current loan and the lending options.
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You can, if a lender approves the lending and your financial adviser agrees the strategy suits you. Expect the lender to ask how the loan will be repaid if its term runs past your planned retirement.
It is harder once you have stopped work, because new lending is assessed on your income. If you already debt recycle, retirement is usually the point to review whether to keep, reduce or clear the split.
It is your plan for repaying or servicing the loan once you retire, such as selling investments, using super or downsizing. Lenders generally want evidence that supports the plan.
Interest on borrowing used for income-producing investments may stay deductible while the funds remain invested. A deduction is only worth something if you have taxable income to offset, so check your position with a registered tax agent.
Once you meet a condition of release, it is one option. Whether it makes sense is a question for your financial adviser, as it moves money out of super.
A term that ends before you retire can reduce or remove the need for an exit strategy with some lenders. It also lifts your repayments, so your cash flow needs checking first.
When to stop debt recycling before retirement, whether to keep or clear the deductible split and how the 2027 capital gains tax change alters your exit timing.
Read more → GUIDECompare debt recycling with salary sacrifice to super across tax, access, leverage, risk and time horizon for Australian households.
Read more → GUIDEDebt recycling is powerful but it isn't for everyone. The situations where you should wait or walk away, from a licensed broker who says no when it doesn't fit.
Read more →
1. Arranged a loan when our small business situation made it difficult to qualify.
2. Met requirements to have funding available by a specified date.
3. Understood my needs to setup debt recycling to allow tax structuring.
4. Communicated well throughout.
I would use their services again.
Alex, Jess and the Kingfisher team were second to none and their process from start to finish was faultless. As a self-employed business owner, it can be difficult to obtain finance at the best of times. The Kingfisher team made this an easy and efficient proposition and their continued transparent and efficient communication ensured we were kept up to date at all times. Highly recommend them for your finance needs!
Alex and Jess dealt with our investment loan and provided a top tier service. They kept us up to date and communicated every step of the process making it a seamless and smooth experience! Awesome work team we will definitely be back for future loans!
Jess from Kingfisher was outstanding. I couldn't fault her communication, expertise or dedication to finding the best loan for our situation. The entire process was seamless from start to finish. We'll definitely be using Kingfisher again in the future. A top-tier organisation.
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Bring a rough picture of your home loan, income and savings. You will come away knowing whether the lending side looks workable.
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